FiredUp: Crop insurance subsidy takes the risk out of a poor business decision

Photo above by Deborah Kates for The New York Times: “A grassland field in North Dakota that was burned and then seeded with soybeans. More than one million acres have become farmland in the state since 2007.”

The New York Times isn’t a publication that pays a whole lot of attention to agriculture; their attention to the farm bill is where a strategy of “follow the money” has led them. That path goes through the Dakotas.

Their recent story about crop insurance tells us something that most of us who keep an eye on land use could attest to: High crop prices are inducing farmers to look at all the land under their management—even the corners that they never thought worthwhile before—for another spot to plant corn or soybeans. And because the government pays a significant portion of their crop insurance, they are enticed to take a risk on marginal land that good business sense would otherwise have told them to leave alone.

Some quotes from the Ron Nixon’s story:

“When you can remove nearly all the risk involved and guarantee yourself a profit, it’s not a bad business decision,” said Darwyn Bach, a farmer in St. Leo, Minn., who said that he is guaranteed about $1,000 an acre in revenue before he puts a single seed in the ground because of crop insurance. “I can farm on low-quality land that I know is not going to produce and still turn a profit.”

And a quote from a South Dakotan:

Even some farmers argue that the subsidies are already generous to agribusinesses, especially with the government facing large deficits. Jim Faulstich, a farmer and rancher in Highmore, S.D., said he was in favor of farmers having crop insurance, but added that the insurance should not be used to make money at taxpayer expense.

“If we as farmers expect taxpayers to support premium subsidies, it’s only fair that we grow on land that is capable of supporting it,” he said. “Could some of this land be profitable without the crop insurance subsidy? I think not.”

(Check out this video for a look at Jim Faulstich’s farming philosophy.)

For farmers, it’s hard to argue against the money, especially when it’s legal.

For taxpayers, it’s hard not to be aghast that the government is using our money as an incentive to support poor business decisions and terrible land use practices.

What do you think? Comment below!